Incentive Contract with Loss-averse Manufacturer

In this paper, some supply chain incentive models are established to determine the optimal payments in consideration of private information and loss-averse manufacturer. The separating contract and the pooling contract are obtained. In separating contract, manufacturers pass on private information by reducing retailers risks. Both manufacturers and retailers receive reservation earnings. Loss aversion weakens the influence of type on contract. In pooling contract, manufacturers do not strictly distinguish their own types. The types are divided into two intervals, corresponding to two different payments-base payment and premium payment. Both manufacturers and retailers get more revenue. Loss aversion enlarges the range of premium payment.